The next GameStop? 38 heavily shorted stocks that retail investors could target next, according to Goldman Sachs
Although the company’s sales are declining and it is losing money, its stock, which closed at $325 Friday, was up over 1,600 percent in January alone, bid higher by a horde of online traders. GameStop (GME 6.45%) is best known for its inclusion in the 2021 meme stock frenzy whipped up by Reddit investors. Shares of the once stagnant gaming retailer skyrocketed due to the online community WallStreetBets collectively committing to buy and hold the stock in order to sabotage short sellers’ positions.
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The digital distribution channel reportedly accounts for 90% of new console gaming titles, according to technology website Ars Technica. Other heavily shorted stocks have been seeing https://www.broker-review.org/ a surge of interest recently as investors look for the next GameStop. American Airlines, BlackBerry and other formerly downtrodden stocks have had extreme swings in price this week.
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Now back around the $20 level, the question is whether another rally can be sustained, and how high it might go. The GameStop frenzy may have quieted down, but according to Goldman Sachs, the retail trading boom could happen again soon. After three years of falling revenue and consistent losses instead of profitability, GameStop has to do a lot of rebuilding. On the surface, the new initiatives align with changing consumer tastes, which has shifted toward e-commerce. In the past month, GameStop shares are up more than 98%—and they’re up 35% year to date. GameStop earlier this week also announced the launch of its digital wallet for holding non-fungible tokens (NFTs) and cryptocurrency, as part of its plan to transform into a much more digitally driven company.
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- And that spike was widely thought to have been a one-off – hedge funds would never again allow themselves to be blindsided.
- A recent Roaring Kitty’s post reignited interest, briefly boosting GME stock to more than $60.
- Of course, the company is trying to diversify its business by moving into new verticals such as a digital wallet that will allow gamers to receive and send non-fungible tokens (NFTs) and cryptocurrencies.
MicroVision has seemingly not generated any significant revenue as can be seen in the numbers below. Only two analysts follow the stock and only one of them has a published number for 2022 revenue, per Yahoo! Finance. The demand raised its share price massively, which nobody saw coming, and everyone who had banked on it dropping in value had to buy their shares back. This is a massively simplified explanation of something called shorting, or short selling – words you might’ve seen cropping up in your feeds in the last few days.
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The frenzy for the troubled retailer’s stock has been a head-scratcher for the analysts who try to determine a company’s value. A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities. GameStop rose by nearly three-quarters in a single session after one of the biggest boosters of the first meme-stock frenzy returned to the internet trenches following a multi-year absence. Apparently, a cryptic post on X by Keith Gill, aka “Roaring Kitty,” was all it took to once again set off squeezes in some heavily shorted names. This makes GameStop the latest company to join the stock-split bandwagon.
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Believing GameStop overpriced, hedge funds had “shorted” the company, betting the share price would fall. Because the company’s software products have higher profit margins than its hardware products, it missed Wall Street’s estimates on nearly every profitability metric. The company also didn’t provide any guidance and said it would not host a conference call to discuss the results, which raises an eyebrow. The volume of shares being traded had risen to 5.26 million as of this writing, with recent volume averaging about 3.8 million shares.
Stocks with high short interest
The ad tech firm currently trades for a roughly $100 million market capitalization, valuing its shares at about 0.3X price-to-sales (P/S). That’s the same as GameStop’s valuation immediately before its short squeeze and about eight times lower than the average U.S. firm. In other words, it’s a siren’s call for deep-value investors looking for enormous returns. While GameStop is investing in these projects, it’s also shuttering its lowest-performing stores.
More than four million people are in it, usually discussing stocks and shares and where they’re going to invest money. They were the place where millions of young people could trade in used games, debate the merits of different franchises and get advice from GameStop’s staff, often avid gamers themselves. In the 2000s, this winning formula td ameritrade forex review propelled the company to open thousands of stores around the world and make money hand over fist. GameStop’s stock more than doubled in 2007 because investors believed the good times wouldn’t end. Its surging stock price allowed management to raise enough cash to pay off all its long-term debt and have $1.78 billion in cash left over.
GameStop, based in Grapevine, Texas, sells video games at more than 5,000 stores, and the pandemic has been keeping customers away. More worrisome is the long-term shift by customers away from brick-and-mortar stores and toward buying games online. At the same time, champions of the 99% are cheering louder from the sidelines, saying the moves mean that hedge funds, Wall Street and the 1% are finally getting their comeuppance. Using $50 million for 2022’s revenue, which could still be aggressive, makes the market cap to revenue ratio 62x. While this isn’t in the stratosphere, a lot has to go right just to support today’s stock price. Using 2019’s revenue to remove any Covid-19 impact and the current market cap of $3.1 billion, the company’s market cap to revenue ratio is 1,077x.
If you’re sure the company will lose value, you’d make a profit when you buy them back and the price has fallen. With the stock price high, many people will feel like that gamble has paid off. And that, in turn, is having a real-world effect on the share price right now. And that pretty meagre announcement generated a load of buzz on WallStreetBets – which in turn, foot pumped the share price. But on Wednesday, the share price was approaching its January high. In February, the prevailing attitude on Wall Street was the share price was slowly finding its natural position.
This is probably the reason why the market got excited following the announcement of GameStop’s stock split. “The past 25 years have witnessed a number of sharp short squeezes in the U.S. equity market, but none as extreme as has occurred recently,” Kostin wrote in the note, published on January 29. “In the last three months, a basket containing the 50 Russell 3000 stocks with market caps above $1 billion and the largest short interest as a share of float has rallied by 98%.”